World View & Market Commentary. Forest first; Trees second. Focused on Real & Knowable facts that filter through the "experts" fluff and media hyperbole. Where we've been, what the future may hold and developing a better way forward.

Monday, March 9, 2009

The market just can’t launch any type of sustainable rally; it’s just slip sliding away, day after day. No fear, just grind, grind lower.

Today the Dow slipped away 80 points which is now a 1.2% move, the S&P gave up 1% even, the NDX lost 2%, and the RUT led the slide by losing 2.2%. Opposite the normal trend, the XLF gained 1.3%. IYR gained 2.1%, Gold lost $20 an ounce, Oil gained, and the transports went to new lows again by losing yet another 2.2%.

Even though it wasn’t much of a decline, and the major indices did not exceed their Friday intraday lows, they did all make new bear market closing lows.

COF (Capital One) became the latest financial to slash their dividends, following Wells Fargo who did the same on Friday. People on CNBS were just SHOCKED that mergers and deals in the big drug names didn’t rally the markets to the moon – shocked! Because, you know, three years ago it would have.

Internals showed about 2.5 to 1 negative issues and about 54% of the volume was on the down side. New lows declined to 600 issues, a slight positive divergence. Friday had a small movement on the McClelland Oscillator, and I do not believe today satisfied the requirement for a large movement. Thus, I would expect a large movement tomorrow, direction unknown from that indicator.

When we look at a 30 minute chart of the SPX, we can see that we’re still just following that wave 3 channel on down. Today we peaked this morning right on the 696 pivot and closed on 676 – more sixes. The next pivot lower is at 644. You can see the grind, no spectacular free falls, but a very steep channel. The stochastics up to 30 minutes are all oversold which actually favors some upside tomorrow, but the 60 minute is midrange and could go either way. The same old saying still applies because we are so oversold – bounce or continue to crash:

When we zoom out to a one month daily, we find an inverted hammer. Those are normally potential reversal indicators, but during this decline they have not been so far and we’ve had several of them. The tell will be tomorrow… to be valid as a reversal indicator, prices must rise immediately at the open. The SPY and DIA both have similar hammers, not perfect hammers by any means but they are there:

When I look at the DOW, I see a bearish red candle on slightly lower volume. See the green channel? We are closer to the top than to the bottom. Now see the red down sloping line? That line is from the October and November pin lows… it has been holding the DOW up for the past three days. It needs to break or it will force prices out of the channel:

Next is the DIA, the DOW ETF… Note that there is a candle that’s close to being a hammer here, but more of a doji. The SPY is the same:

Next is the NDX daily. You can see that we pinned the top of the channel and collapsed hard throughout the day. That’s a big inverted hammer too. I’m not sure of the implications, it looks more negative than a reversal indicator, but we’ll have to see by watching tomorrow’s action:

Here is a 3 month chart of TLT (20 year bonds). I am showing this to demonstrate that we’re still in what appears to be a large wave 4 channel. Note that as equities have declined, overall bonds have held steady. This could break down once we do finally get some rally in stocks:

And this is the most bullish thing I could find for the markets for tomorrow. It’s a TNX (10 year Treasuries) daily chart. Note the near perfect inverted hammer here. If you look back you will see that these hammers almost always produce motion up the stem the next day. If that occurs, I would expect that stocks would rally if the usually relationship here holds. Again, it will be confirmed or not by tomorrow’s action:

Finally, here is the Put/Call ratio. It’s sitting at just .74, an area not usually associated with bottoms, so there is the counter to those inverted hammers. Also, the VIX still does not show signs of great volatility – perhaps it’s showing the resignation of a steady grind:

Overall just a steady slip sliding lower motion… Still in the channel, still nothing that is shouting capitulation or bottom to me. I know McHugh has a turn date on the 13th and Seth has a full moon coming up, so perhaps we’ll get a two week wave 4 bounce in here sometime soon, but it would certainly be uneventful to just squeeze out of the channel, that’s not the way it usually happens. Usually it takes some sort of hard selling to wash people out, or it requires very bullish news to create a reversal – don’t see it so far.

So, I started thinking about a song choice for the market action today and a song that’s NOT one of my favorites popped into my head. It’s just too appropriate not to post it... heck, he even looks like he’s slip slidin’ away into a depression.